OFG Bancorp (OFG) and Franklin Financial Network (FSB) Critical Analysis

Franklin Financial Network (NYSE: FSB) and OFG Bancorp (NYSE:OFG) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, risk, profitabiliy, dividends, earnings and analyst recommendations.

Profitability

This table compares Franklin Financial Network and OFG Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin Financial Network	23.50%	12.26%	1.02%
OFG Bancorp	14.58%	8.36%	0.98%

Insider and Institutional Ownership

55.3% of Franklin Financial Network shares are held by institutional investors. Comparatively, 99.4% of OFG Bancorp shares are held by institutional investors. 12.4% of Franklin Financial Network shares are held by insiders. Comparatively, 2.6% of OFG Bancorp shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

OFG Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 2.5%. Franklin Financial Network does not pay a dividend. OFG Bancorp pays out 22.0% of its earnings in the form of a dividend. OFG Bancorp has raised its dividend for 3 consecutive years.

Earnings & Valuation

This table compares Franklin Financial Network and OFG Bancorp’s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Franklin Financial Network	$100.84 million	4.37	$31.90 million	$2.42	13.80
OFG Bancorp	$313.09 million	1.37	$47.90 million	$1.09	8.94

OFG Bancorp has higher revenue and earnings than Franklin Financial Network. OFG Bancorp is trading at a lower price-to-earnings ratio than Franklin Financial Network, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Franklin Financial Network has a beta of 1.44, indicating that its stock price is 44% more volatile than the S&P 500. Comparatively, OFG Bancorp has a beta of 1.48, indicating that its stock price is 48% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Franklin Financial Network and OFG Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin Financial Network	0	3	2	0	2.40
OFG Bancorp	0	2	0	0	2.00

Franklin Financial Network currently has a consensus price target of $40.50, suggesting a potential upside of 21.26%. OFG Bancorp has a consensus price target of $13.25, suggesting a potential upside of 35.90%. Given OFG Bancorp’s higher possible upside, analysts plainly believe OFG Bancorp is more favorable than Franklin Financial Network.

Summary

Franklin Financial Network beats OFG Bancorp on 10 of the 17 factors compared between the two stocks.

About Franklin Financial Network

Franklin Financial Network, Inc. is a financial holding company. Through its bank subsidiary, Franklin Synergy Bank (the Bank), a commercial bank, the Company provides a range of banking and related financial services. The Company focuses on the provision of services to small businesses, corporate entities, local governments and individuals. As of December 31, 2016, the Company operated through 12 branches in Williamson and Rutherford counties and a loan production office within the Nashville metropolitan area. The Company’s loan portfolio consists of real estate loans, including construction and land development loans, commercial loans and residential loans; commercial and industrial, and consumer and other loans. The Company’s investment securities portfolio consists of both securities classified as available-for-sale and securities classified as held-to-maturity. The Company’s primary sources of funds include deposits.

About OFG Bancorp

OFG Bancorp is a financial holding company. The Company is engaged in providing banking and financial services through its subsidiaries. The Company operates through three segments: Banking, Wealth Management and Treasury. The Company provides banking and financial services to its clients through a range of banking and financial solutions, including commercial, consumer, auto, and mortgage lending; checking and savings accounts; financial planning, insurance, financial service, and investment brokerage, and corporate and individual trust and retirement services. The Company provides these services through various subsidiaries, including a commercial bank, Oriental Bank; a securities broker-dealer, Oriental Financial Services Corp. (Oriental Financial Services); an insurance agency, Oriental Insurance, LLC (Oriental Insurance), and a retirement plan administrator, Oriental Pension Consultants, Inc. (OPC).